Annual Report Year Ending 31 March 2009
REPORT TO THE ASSEMBLY COMMISSION
FOR YEAR ENDING 31 MARCH 2009
1.1 The purpose of this Report is to provide the Assembly Commission with an account of the establishment of the reconstituted Secretariat Audit and Risk Committee (SARC) in 2008/2009. The Report also sets out the SARC’s objectives for 2009/2010.
The Report for 2008/2009 will be brief as the reconstituted SARC was only formed at the end of the year and did not hold its first meeting with full membership until April 2009.
2 GOVERNANCE STRUCTURES
The three key organisational structures which support the delivery of corporate governance in the Assembly Secretariat are:
- The Assembly Commission
The Commission was established by the Northern Ireland Act 1998 (Section 40) to “provide the Assembly, or ensure that the Assembly is provided, with the property, staff and services required for the Assembly’s purposes”. The Assembly Commission may delegate any of its functions to the Speaker or a member of staff of the Assembly. The Assembly Commission is chaired by the Speaker and consists of five other Assembly Members.
- The Secretariat Audit and Risk Committee
The Secretariat Audit and Risk Committee is independent of the Secretariat. It supports the Clerk/Director General in his role as Accounting Officer. It also provides independent support to the Assembly Commission in monitoring its responsibilities for issues of risk, control and governance by reviewing the comprehensiveness of assurances.
- The Secretariat Management Group
The Secretariat Management Group is a top level management forum to advise and support the Clerk/Director-General in the exercise of his duties. The Secretariat Management Group comprises the Clerk/Director General (Chair) and the Directors of Properties, Resources, Engagement and Clerking and Reporting. The Director of Legal Services attends meetings as required.
3 THE SECRETARIAT AUDIT AND RISK COMMITTEE (SARC)
The Northern Ireland Assembly Secretariat Review Report of October 2007 dealt with a number of issues including the identification of appropriate organisational and management structures, policies and governance arrangements. In particular, recommendations relating to the Audit Committee structure and membership were made to ensure compliance with the HM Treasury “Audit Committee Handbook”, as relevant to the context of the Assembly Secretariat. In order to support the revised governance arrangements within the Assembly Secretariat it was agreed to improve on the existing Audit Committee arrangements. This included the appointment of an independent Chair and an independent Member to the Secretariat Audit and Risk Committee (SARC) to facilitate an objective assessment of the assurances provided to the Accounting Officer on the risk management, control and governance arrangements within the Secretariat.
The membership of the reconstituted SARC consists of:
- Two independent members, one of whom is the Chairperson.
- One member of the Assembly Commission.
The Chairperson, Mr Alan McQuillan, and the Independent Member, Mr Colm McKenna, were appointed with the approval of the Assembly Commission on 1 March 2009 and 16 March 2009 respectively following an open recruitment competition.
The Assembly Commission representative during 2008/2009 was Mr Alban Maginness MLA.
3.3 Terms of Reference
Draft Terms of Reference for the Secretariat Audit and Risk Committee were developed following the appointment of the Independent Chairperson and Member. These were agreed at the first meeting of the reconstituted Committee which took place on 23 April 2009. The Terms of Reference were subsequently approved by the Assembly Commission on 21 May 2009. A copy is attached at Annex A.
The Secretariat Audit and Advisory Committee (SAAC), the predecessor to SARC, met three times during 2008/2009 (14 May, 17 September, and 17 December).
SARC meetings will take place at least four times a year although the Chairperson may convene additional meetings should he feel that this is necessary. A minimum of two Members of the SARC must be present for a meeting to be deemed quorate.
Prior to the first formal meeting of the SARC on 23 April 2009, the Chair and Independent Member met during March 2008 with the Speaker, the Clerk/Director General and senior officials for briefing purposes.
SARC meetings are normally attended by the Accounting Officer, the Director of Resources, the Head of Internal Audit and a representative from the Northern Ireland Audit Office. Secretarial support is provided by the Director General’s Office.
4 PROGRESS OF SARC IN 2008/9
A large part of the focus of SARC in its first 4 months has been on:-
- Developing its understanding of the work of the Secretariat, the Commission and the Assembly
- Developing clear Terms of Reference for approval by the Commission
- Putting in place the management information systems and controls it will need to operate effectively
- Ensuring that all members have received appropriate training to enable them to be effective in their roles
- Playing its role in the accounts completion process for 208/9 and giving the relevant advice and assurance to the Clerk / Chief Executive
4.2 Management Information Systems and Controls
SARC has caused to be developed a clear running log of all outstanding Audit Recommendations from previous years together with a statement of the current position on each and a target date for completion of any outstanding actions. This will be used at each meeting to monitor progress and ensure that past recommendations are managed and closed in a controlled manner.
In developing the draft Terms of Reference the members of SARC also agreed that to assist them in fulfilling their role, the following information should be provided at each quarterly meeting:
- A report summarising any significant changes to the Assembly Secretariat’s Corporate Risk Register and any issues of concern relevant to SARC regarding the delivery of the Corporate Plan;
- A progress report from the Head of Internal Audit summarising:
- Work performed (and a comparison with work planned)
- Key issues emerging from Internal Audit work
- Management response to audit recommendations
- Changes to the Periodic Plan
- Any resource issues affecting the delivery of Internal Audit objectives
- A progress report from the NI Audit Office representative summarising work done and emerging findings.
A list of additional detailed information to be provided as required is contained in paragraph 9.2 of the Terms of Reference (Annex A).
4.3 Corporate Risks
The Corporate Risk Register was revised by the Secretariat Management Group (SMG) during 2008/2009. This is reviewed monthly by SMG and amended as necessary. SARC has reviewed the risks identified in the Corporate and Directorate Risk Registers and has made a number of recommendations to enhance the means by which the likelihood and impact of these Risks are recorded.
The Corporate Risk Register will be submitted to the quarterly meetings of the SARC with a report highlighting any significant changes and any areas of concern. SARC will monitor the actions taken by SMG to manage the Corporate Risks to ensure they remain both relevant and effective. Copies of the Assurance Statements completed by Risk Owners will be submitted to the SARC for scrutiny every six months.
4.4 Audit Programme for 2008/2009
The number of audit assignments completed by Internal Audit during the 2008/09 year was limited for a number of reasons. Initially during the year Internal Audit resources were allocated to assist the implementation of recommendations arising from the review of the Secretariat. In addition support was also provided on the development and implementation of revised Corporate and Directorate Risk Management arrangements. A number of staffing issues during the year also impacted on the number of assignments that could be completed, however reports were issued in respect of the Education Service and Gifts and Hospitality. Thirty one recommendations were made on these reports, of which thirty were accepted by management. Follow-up audits are currently underway in both of these areas. A review was also carried out to identify the options available in respect of Ormiston House with the assistance of the Research Service.
Although the overall assurance rating provided by Internal Audit for the 2008/09 year was limited this was due at least in part to the reduced programme of audits. The more comprehensive work programme for 2009/10 will provide a more balanced view of the risk management, control and governance arrangements in place in the Secretariat.
In addition, after reviewing the Audit Reports for 2008/9 SARC identified a number of key issues / areas which it considered represented particular risks to the organization. It has therefore commissioned Internal Audit to carry out further, very specific targeted work in these areas during 2009/10 to provide additional assurance. These areas include:-
- Procurement (covering general processes and specific problem areas)
- Members’ Pensions,
- Clerking and Reporting Procedures
4.5 Accounts 2008/2009
Based on an examination of the Accounts and the Report to Those Charged with Governance, SARC recommended on 24 June 2009 that the Clerk/ Director General sign the 2008-09 accounts. Alan McQuillan and Trevor Reaney expressed thanks to the staff involved in achieving the smooth completion of the accounts process within the required timescale and also to the NI Audit Office for their prompt and helpful comments.
The audit of the 2008-2009 Accounts having been completed successfully, the NIA Finance Office is currently restating the Accounts to accurately reflect the accounting impact of the introduction of the International Financial Reporting Standards (IFRS) to the public sector. The Department of Finance and Personnel requires all Accounts to be ready for auditing by the end of September 2009. The NIA is on schedule to achieve this target date.
5 BUDGET AND EXPENDITURE FOR 2008/2009
There was no dedicated budget for SARC’s predecessor (SAAC) as expenditure was minimal (approximately £36 in 2008/2009) and related to the cost of refreshments for meetings. These costs were met from existing budgets.
The reconstituted SARC did not meet formally in 2008/2009. Costs incurred in relation to attendance at a briefing meeting during March 2009 amounted to £95. Due to the date of the claim, this was met from the 2009/2010 budget.
6 KEY OBJECTIVES FOR SARC FOR 2009/10
The Secretariat Audit and Risk Committee has agreed the following objectives for 2009/2010:
- To support the Clerk/Director and his team in delivering the Secretariat’s Objectives, managing risk and driving up assurance levels
- To further improve the Management Information System and Management controls available to the SARC to ensure they are able to identify and analyse key issues
In order to facilitate the ability of SARC to identify and analyse key issues, steps have been taken to ensure that regular information is provided on a range of issues, including, progress on account preparation, copies of Internal and External Audit reports and analyses of recommendations made, accepted and implemented. In addition SARC is provided will a rating of the overall level of assurance arising from audit work.
- To agree a clear Internal Audit Plan driven by the greatest risks faced by the Secretariat
SARC has approved a programme of Internal Audits which includes all aspects of the Secretariat and is designed to provide a comprehensive assessment of the level of risk management, control and governance. This programme was agreed following an extensive risk assessment exercise performed by Internal Audit which considered a number of factors. These included the Corporate and Directorate Risk Registers, financial and non-financial risks as well as consideration of the outputs from previous reviews of business areas. The resulting programme of Internal Audits was determined using the risks scores arrived at to recommend a priority order for consideration / approval by SARC .
7 BUDGET FOR 2009/10
The reconstitution of SARC and the appointment of Independent Members necessitated the allocation of a separate cost centre for the SARC as well as the development of a dedicated budget for 2009/2010. The expenditure to support the activities of the SARC has been estimated at £19,300. A detailed breakdown of this budget is attached at Annex B.
8 AUDIT PLAN 2009/10
In addition to an annual programme of Internal Audits, SARC has also approved a draft forward audit plan. This has been used to identify key risk areas of the Secretariat (such as finance, HR and IT systems) which will be subject to regular Internal Audits. Lower risk areas which will be included in the second and third years of the programme.
The forward programme is intended to be flexible to allow the inclusion of audits considered to be of increased priority by SARC and will take account of emerging issues and changes to the priorities allocated to Corporate and Directorate Risks.
9 AUDIT ACTIVITIES TO DATE IN 2009/2010
9.1 Work completed
At 31 July 2009, final Internal Audit reports had been issued in respect of:
- The Use of Taxis
- Travel and Subsistence
- Members Pensions
- Outsourced Service Contracts
- Information Security
In addition a draft report has been issued in respect of the OFMDFM Committee and work is nearing completion on the audit of business travel. A follow up audit has been completed for the audit of Research and additional follow up audit are currently underway for the Education Service and Gifts and Hospitality.
9.2 Summary of Assurance levels
The overall level of assurance reported by Internal Audit at the June 2009 meeting of SARC was “Satisfactory”. This was based on the results of the audits listed at 9.1 all of which had “Satisfactory” ratings with the exception of the Use of Taxis. It is anticipated that implementation of the recommendations made by Internal Audit will result in this assurance rating being revised to “Satisfactory”.
For the Internal Audits for which final reports have been issued since 1 April 2009, a total of 52 recommendations have been made of which 41 were accepted by management. Follow up audits have been scheduled for later in the year to confirm satisfactory implementation of these recommendations.
The assessment of the overall level of assurance from Internal Audit as “Satisfactory” represents an improvement on the limited rating that had been given previously. SARC considers that this assessment reflects the work to date in the Secretariat in improving both the management of risk and the corporate governance arrangements. This is encouraging progress and consideration will be given to the means by which the level of assurance can be further improved .
ALAN McQUILLAN, INDEPENDENT CHAIRPERSON
COLM McKENNA, INDEPENDENT MEMBER
ALBAN MAGINNESS, ASSEMBLY COMMISSION REPRESENTATIVE
NORTHERN IRELAND ASSEMBLY
SECRETARIAT AUDIT AND RISK COMMITTEE
TERMS OF REFERENCE
The Northern Ireland Assembly Secretariat Review Report of October 2007 dealt with a number of issues including the identification of the appropriate organisational and management structures, policies and governance arrangements necessary to provide the Assembly with the property, staff and services required and to the standards expected.
In particular, recommendations relating to the Audit Committee structure and membership were made in order to ensure compliance with the HM Treasury “Audit Committee Handbook”, as relevant to the context of the Assembly Secretariat.
Therefore, in order to support the revised governance arrangements within the Assembly Secretariat (which include delegated authority from the Commission to the Clerk/Director General, an enhanced system of business planning and risk management, stewardship reporting and clear management structures) it was agreed to improve upon the existing Audit Committee arrangements.
The appointment of an independent Chair and an independent Member to the Secretariat Audit and Risk Committee (SARC) will facilitate an objective assessment of the assurances provided to the Accounting Officer on the risk management, control and governance arrangements within the Secretariat. These assurances will range from stewardship statements from operational management, financial statements and reports from both Internal and External Audit.
The information provided to the Committee will enable the Chair to advise the Accounting Officer on the adequacy and effectiveness of the assurances and on how well the assurance received meets the assurance need.
The Commission has established the Secretariat Audit and Risk Committee (SARC) to support the Director General (in his/her role as Accounting Officer) and the Assembly Commission and Secretariat Management Group in monitoring their responsibilities for issues of risk, control and governance by reviewing the comprehensiveness of assurances in meeting the organisation’s assurance needs and reviewing the reliability and integrity of these assurances.
The members of the SARC include:
• One member of the Assembly Commission;
• Two independent members;
• The SARC will be chaired by one of the independent members.
The SARC will be provided with a secretariat function by the Office of the Clerk/Director General.
4.1 The SARC will provide the Commission, Accounting Officer and the Secretariat Management Group with an Annual Report, timed to support the finalisation of accounts and the Statement on Internal Control, summarising its conclusions from the work it has done during the year. The report will summarise the SARC opinion regarding:
(a) the comprehensiveness of assurances in meeting the Commission’s and Accounting Officer’s needs;
(b) the reliability and integrity of these assurances;
(c) whether the assurance available is sufficient to support the Commission and Accounting Officer in their decision taking and their accountability obligations;
(d) the implication of these assurances for the overall management of risk;
(e) any issues the SARC considers pertinent to the Statement on Internal Control and any long-term issues the Committee thinks the Commission and/or Accounting Officer should give attention to;
(f) financial reporting for the year;
(g) the quality of both Internal and External Audit and their approach to their responsibilities;
(h) the SARC view of its own effectiveness, including advice on ways in which it considers it needs to be strengthened or developed;
(i) the manner in which issues involving best use of resources/value for money have been addressed.
4.2 The Chair of the SARC should attend at least one meeting of the Commission each year to report in private, without the presence of members of the Secretariat.
4.3 The minutes of each SARC meeting should be made available to the Commission.
4.4 The Independent Chair and Member of the SARC will undergo an annual appraisal.
5.1 The SARC can help the Commission to formulate its assurance needs and then advise on how well assurance received actually meets the assurance need. Assurance will help the Commission to judge whether or not its agenda is focussing on the issues that are most significant in relation to achieving the Secretariat’s objectives and whether best use is being made of resources.
5.2The SARC will advise the Commission, the Accounting Officer and the Secretariat Management Group on:
• the strategic process for risk control and governance and the Statement on Internal Control;
• the accounting policies, the accounts and the annual report of the Assembly Secretariat, including the process for review of the accounts prior to submission for audit, levels of error identified and management’s letter of representation to the Northern Ireland Audit Office (NIAO);
• the adequacy of management response to issues identified by audit activity including the Report to those charged with Governance from the NIAO;
• assurances relating to the corporate governance requirements for the Assembly Secretariat;
• assurance relating to the adequacy and effectiveness of both Internal and External Audit, the definition of future audit requirements and assist where required in deciding the best means of procuring these services;
• the extent to which anti-fraud policies, whistle-blowing processes and arrangements for special investigations comply with best practice.
5.3 Actions taken by the SARC in order to discharge its responsibilities will include:
• approval of the planned activity and results of both internal and external audit;
• the commissioning of specific audits;
• the identification (where appropriate) of sources of expert advice.
The SARC may:
• co-opt additional members for a period not exceeding one year to provide specialist skills, knowledge and experience;
• procure specialist ad-hoc advice at the expense of the Assembly, subject to budgets agreed by the Commission.
7.1 The Chair of the SARC should have right of access to the Speaker in his role as Chair of the Commission.
7.2 The Head of Internal Audit and the representative of the Northern Ireland Audit Office will have free and confidential access to the Chair of the SARC.
8.1 The SARC will meet at least four times a year. The Chair of the SARC may convene additional meetings, as he/she deems necessary.
8.2 A minimum of two Members of the SARC will be present for the meeting to be deemed quorate.
8.3 SARC meetings will normally be attended by the Accounting Officer, the Director of Resources, the Head of Internal Audit and a representative from the Northern Ireland Audit Office.
8.4 The SARC may ask any other officials of the Assembly to attend to assist it with its discussions on any particular matter.
8.5 The SARC may ask any or all of those who normally attend but who are not members to withdraw to facilitate open and frank discussion of particular matters.
8.6 The Commission, the Accounting Officer or Secretariat Management Group may ask the SARC to convene further meetings to discuss particular issues on which they want the Committee’s advice.
8.7 At the discretion of the Chair, minor matters which require attention between scheduled meetings of SARC may be dealt with by correspondence and reported to the next scheduled meeting.
9 INFORMATION REQUIREMENTS
9.1 For each meeting the SARC will be provided with:
• A report summarising any significant changes to the Assembly Secretariat’s Corporate Risk Register and any issues of concern relevant to SARC regarding the delivery of the Corporate Plan;
• A progress report from the Head of Internal Audit summarising:
▪ Work performed (and a comparison with work planned)
▪ Key issues emerging from Internal Audit work
▪ Management response to audit recommendations
▪ Changes to the Periodic Plan
▪ Any resourcing issues affecting the delivery of Internal Audit objectives
• A progress report from the NIAO representative summarising work done and emerging findings.
9.2 As and when appropriate, or when requested, the SARC will also be provided with:
• Proposals for the Terms of Reference of Internal Audit;
• The Internal Audit Strategy;
• Head of Internal Audit’s Annual Opinion and Report;
• Quality Assurance reports on the Internal Audit function;
• The draft accounts of the Assembly;
• The draft Statement on Internal Control;
• A report on any changes to accounting policies;
• A report from the Accounting Officer summarising progress against the Secretariat’s Business Plan, highlighting any issues that may be relevant to the work of the SARC;
• The NIAO’s Report to those charged with Governance;
• A report on any proposals to tender for audit functions;
• A report on co-operation between Internal and External Audit;
• The NIAO audit strategy;
• Information on any impending changes (as identified by Internal or External Audit) that may impact upon the work of the SARC.
10 REGISTER OF INTERESTS
Members of the SARC will record in the SARC Register of Interests any issues on which they might have a conflict or perceived conflict of interest. The SARC as a whole should consider how matters on which a member may have a conflict of interest will be handled.
The Corporate Policy Unit of the Director General’s Office will provide secretariat services to the SARC. The secretariat will be responsible for ensuring compliance with procedures and maintenance of a Register of Interests. An agenda and papers will be circulated one week in advance of each meeting. A summary of action points will be sent to the Chairperson within three working days of each meeting. Approved action points will be issued to relevant staff within one working day of receipt. Draft minutes will be sent to the Chairperson within five working days of the meeting. The formal minutes will be posted on the Assembly website within three working days of their approval.
The Secretariat will prepare an induction pack for new members.
SARC BUDGET 2009/2010
|Committee members’ fees and incidentals||12,000|
|Public transport rates||500|